OTTAWA—Canadian residential construction was hotter than expected in September as the pace of housing starts picked up nationally, despite a decline in Ontario.

Canada Mortgage and Housing Corp. (CMHC) said Tuesday the seasonally adjusted annual rate of starts was 220,617 in September, up from 184,201 units in August.

Economists had expected an annual pace of 190,000 on a seasonally adjusted basis, according to Thomson Reuters.

CMHC said construction of urban multiple-unit dwellings such as townhouses, condominiums and apartments were the main reason for the increase in most regions, particularly Quebec.

The agency said the moving six-month trend also rose to 199,503 units in September, from 196,465 in August.

CIBC economist Nick Exarhos said the September numbers were the strongest in a year, driven by healthy gains in both multiple-unit and single family homes.

“It was a warm September, but a scorcher for housing starts in Canada,” Exarhos wrote in a note to clients.

Toronto was an exception, with the seasonally adjusted rate dropping to 30,232 units from 40,406 units in August — mainly as a result of fewer apartment starts.

Canada’s most populous city helped pull down Ontario’s overall activity to 67,426 housing starts in September, from 70,262 units in August. Several smaller Ontario cities also recorded but others showed gains.

Quebec saw the largest gain in housing starts last month, due to the development of new rental apartments for seniors. There were also increases in British Columbia, the Prairies and Atlantic Canada.

However TD Bank economist Diana Petramala said she expected the pace of housing construction to ease through the rest of the year.

“For one, the new mortgage and tax regulation introduced by the federal government last week is likely to shave up to 10 per cent off home sales over the remainder of the year, and homebuilding activity will likely follow suit.

“From a regional perspective, most markets are likely to see a moderation in construction activity. In addition, the normalization in housing activity in Vancouver is likely to temper new home construction in the city.”